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Ethereum price rallies above $400 resistance on bullish ETH options data

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Ether (ETH) options open interest grew by 230% to reach $393 million in the past three months. Although this is an impressive figure, it doesn’t fully reflect how the derivative instruments being used.

Ether options open interest, USD. Source: Skew

Strike levels appear bullish

The first thing one should take note of is the most used price levels (strikes). Once again, this information does not provide a clear picture of whether these options are mostly used for bullish or bearish strategies.

In general, a chart heavily populated with strikes below the current market level indicates that either traders were taken by surprise due to a recent hike, or fewer investors are currently bullish.

Ether options by strike level, (thousands)

Ether options by strike level, (thousands). Source: Skew

According to the above data, there are presently 535K Ether options open interest with strikes at $380 and below. On the other hand, there are only 243K Ether options at $425 or higher.

This could be partially be explained by the 68% bull run to the $400 level which occurred  in late July, although this is not necessarily a positive indicator.

Unlike futures contracts, options are divided into two segments. Call (buy) options allow the buyer to acquire Ether at a fixed price on the expiry date. On the other hand, the seller of the instrument will be obliged to make the Ether sale. 

By measuring whether more activity is going through call (buy) options or put (sell) options, it is possible to gauge an overall market sentiment.

Ether options put/call ratio

Ether options put/call ratio. Source: Skew

There are currently 21% fewer put (sell) options open interest relative to call (buy) instruments. This is the lowest level in 3 months and indicates an overall bullishness from options traders.

Although a good indicator, the put-call ratio reflects trades that might have happened over a month ago. Therefore, to better gauge current market sentiment, one should focus its attention on the 25% delta skew indicator.

Skew indicator confirms bullishness

The 25% delta skew compares side-by-side equivalent call (buy) and put (sell) options. If the protection for price upswings using call options is more costlier, the skew indicator shifts to the negative range. The opposite holds when investors are bearish, causing put options to trade at a premium, causing skew indicators to shift positively.

Ether 3-month options 25% delta skew

Ether 3-month options 25% delta skew. Source: Skew

The above chart shows a shift to a bullish stance since late-May, reaching a quasi-extreme 20% optimist level late July. Currently the -12% skew lies in bullish terrain, confirming the put-call ratio indicator.

Generally, Ether options seem bullish despite the concentration of strikes below $400 level. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.





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Cointelegraph Magazine is a new publication that goes beyond the daily news and delves much more deeply into the stories, trends, and personalities that inspire cryptocurrency and blockchain conversations around the world.

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‘Ethereum Improvement Proposal 3675’ for the Eth2 merge launches on Github

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A formal Ethereum Improvement Proposal has been created for the network’s forthcoming chain merge, bringing Ethereum one step closer to realizing its highly anticipated Proof-of-Stake (PoS) transition.

On July 22, ConsenSys researcher Mikhail Kalinin created a pull-request for EIP-3675 on Github, formalizing the chain merge as an improvement proposal for the first time. The EIP has also been slated for discussion during the July 23 Ethereum Core Devs Meeting by developer Tim Beiko.

The proposal would merge the Ethereum and Eth2 chains, transitioning the network’s consensus mechanism away from Proof-of-Work and empowering stakers to validate transactions.

The EIP notes that no “safety nor liveness failures were detected” since the launch of Eth2’s beacon chain in December 2020, adding:

“The long period of running without failures demonstrates the sustainability of the beacon chain system and witnesses its readiness to start driving and become a security provider for the Ethereum Mainnet.”

Despite the EIP, many leading figures in the Ethereum community, including lead developer Vitalik Buterin, believe it is very unlikely the chain merge will occur during 2021.

The EIP comes amid bidding for the EIP-1559 Supporter NFT series which was launched via Mirror on July 21. The nonfungible tokens demonstrate support for the introduction of a burn mechanism to Ethereum’s fee market as part of the network’s coming London upgrades. All proceeds will be shared among 1559’s contributors, and the tokens were designed by artist “Kitteh.

Since the launch of the beacon chain in December, Eth2 has emerged as the second-largest PoS network by staked capitalization in USD terms, with $12.7 billion worth of Ether locked in staking despite less than 6% of its circulating supply having been deposited.

According to Staking Rewards, Cardano has the largest staked capitalization with $24.2 billion and 62% of supply locked. Solana ranks third with $10.2 billion from 74%, followed by Polkadot with $9 billion from 63%.